Lenders are really answering one question: how likely are you to repay this loan? They assess that through a handful of key factors. Understanding them helps you qualify — and qualify for better terms.
Credit Score
Your score reflects how you've handled credit in the past. Higher scores generally mean easier approval and lower rates. Pay bills on time, keep credit card balances low, and avoid opening new accounts right before applying.
Debt-to-Income Ratio (DTI)
DTI compares your monthly debt payments to your gross monthly income. Lenders use it to gauge how much additional debt you can handle. A lower DTI strengthens your application; paying down debts before applying can make a real difference.
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See My Loan OptionsIncome and Employment
Lenders want stable, documented income. Expect to provide pay stubs, W-2s or tax returns, and possibly bank statements. Self-employed borrowers usually need a couple of years of returns to show consistent earnings.
Down Payment and Reserves
The more you put down, the less risk for the lender — and sometimes the better your rate. Some lenders also like to see "reserves," meaning savings left over after closing to cover a few months of payments.
How to Improve Your Odds
- Check and fix credit report errors early.
- Pay down high-interest debt to lower your DTI.
- Avoid major purchases or new loans before applying.
- Save for a larger down payment and a cushion of reserves.